3. 1. Analyse the market for hot chocolate
a. During the winter
During winter, the sales of the hot coffee are expected to increase. It is necessary for the
management to retain or control the price of the coffee products, as it would attract more
clients towards the product purchases.
b. Price of tea
The price of the tea needs to be regularised as it would be required to retain the market. Tea
lovers would still prefer to buy tea, even if the price for the coffee products decreases.
Demand and supply chain system is based on the product value and the price for the services.
The reduction or an increase in the price of the coffee products is irrelevant of an increase in
the demand and the price variations of the tea products.
c. Price for the coffee decreases
With a reduction in the price for the coffee beans, the management can expect an increase in
the sales of the products. This is defined or included in the demand and supply rules stated by
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4. the economists. Quality of the products, apart from the price is the other factors that influence
the buyer’s decision. Due to the reduction in the coffee products, the management can plan
for an increase in the sales of the products of the coffee beans.
d. Price of the whipped cream falls
The sales of the coffee beans and its price are not impacted due to the drop in the price of the
whipped cream. This cream is used for decorating the coffee, and it is not related with the
price and the supply of the products. The sales of the coffee beans would be slightly impacted
due to the reduction in the whipped cream price.
e. Method for harvesting cocoa beans
The product demand for the coffee beans is increased with an increase in the supply of the
products. With an improvement in the harvesting technology, the supply of the beans is
increased, and this assists in regulating the price for the services (Fleetwood, 2014).
f. surgeon announcement
Coffee bean to cure acne related issues is expected to increase the demand for the products
and its supply. During this time, the price for the coffee bean is expected to increase, and it
depends upon the output for the services. With an increase in the demand of the coffee beans
and increase in the supply, the price can be regularised. With limited supply, the authorities
are expected to face serious challenge in regulating the price for the services.
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5. g. Unavailability of milk
Reduction in the availability of milk certainly increases the milk price. This can impact the
demand of the coffee products by the clients. However, the increase in the price of the milk
wouldn’t affect the coffee lovers who prefer black coffee with no milk. The price for the
coffee products would increase due to the availability of the milk. During this time, the
management or the authorities could handle the requirements of the clients.
h. Fall in the income
The demand for the coffee would be moderate, even if the price for the services is low. It is
because the income of the mass people is reduced due to recession. In order to increase the
sales, it is recommended to reduce the price of the coffee further, as it would help in
accommodating the demand for the products. The buying capacity of the products reduces
during recession, even if the product price is reduced (Marwala, Hurwitz, 2017).
i. Price expected to increase
The demand for the raw coffee would increase due to the price variations. In order to regulate
the price and to keep up the supply of the products to the clients, it is relevant for the
management or the authorities to increase the sales, by holding larger stock of the products. It
assists in selling the products to the clients and in regulating the price for the services.
j. Equilibrium of the price
The demand for the equilibrium price for the coffee beans is examined from the market price
and the quantity of the products sold to the clients. By analysing the demand and the supply
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6. curves existing in the market conditions, it is relevant to determine the price at which the
equilibrium price the demand the supply curves meet each other. In order to determine the
equilibrium price, the amount at which the supply and the demand sectors intersect each
other. The price determined 0.50 above the equilibrium tends to increase the demand and the
price for the services (Kibbe, 2017).
The prices are determined after examining an increase or decrease in the price for the coffee
beans. An increase in the price of the products, and this decreases the demand for the coffee.
In order to retain the price and the supply of the coffee beans, it is relevant for the authorities
to regularise the price of the services, and this helps in maintaining the cost and the supply of
the products to the clients.
2. Discus the different type of the market structure and how
can we maximize profit under each market type
There are mainly four different types of market structure that prevails in the economic
market. These markets are quite different from each other, and thus it has a different
implication n the price analysis. Different market structures define different methods and
strategies that are being used to sell the products and to increase the sales and the customer
data base for the clients. Through the developed strategies, it is possible for the management
and the clients to develop an effective measure and strategies that can be used for incr3easing
the sales.
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7. The types of market structures are –
a. Perfect competition – In the perfect competitive market, there are lager number of
small companies that compete with each-other. The prices for the products are
regulated as there are no single firm that has a major power in the sales of the
services. Products are socially optimised at different levels of the output, and this
provides the companies equal opportunities to conduct the operational works. The
companies can grab the opportunities to maximise profits by offering the better
services to the clients. It is also assumed that the clients have no preferences towards
the product purchases. In order to optimise the profit, the companies examine the
preferences of the clients, and it increases the sales of the products in the market. The
factors associated with the perfect competition are examined and it helps in increasing
sales. In the perfect competitive market, the product availability and the sales are
determined after examining the present market condition. These are the most
important factors that determine the value for the products that is sold to the clients
(Mankiw, Taylor, 2011).
b. Monopolistic competition – In the monopolistic competitive market, there are large
number of companies that strives hard to sell the products. The companies enter into
the monopolistic competitive environment to deal with different product related
issues. Market power allows the companies to charge higher price towards the
services that is being offered to the clients. The companies get an opportunity to
increase the profit margin and offer the better services to the clients. In order to
increase the profit margin, the management examine the reasons for the product
preference change in the market. Quality, price, and the positive features for the
services are concentrated by the companies, as it attracts the clients. Such markets are
quite less in number, but the performances and its success depends upon the needs of
the clients and the products in different markets.
c. Oligopoly – In the oligopoly market structure, there are smaller number of dominated
companies that sells different types of products and services to the clients. Such
companies have a positive and stronger hold on the operational works. These
companies can either plan to collaborate or compete against each other. The decisions
are made after examining the future goals and the plans adopted to increase the sales
for the products. These companies enter into the collective market power, which
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8. drives the prices for the services and increases the possibilities to earn more profit.
Oligopolistic market conditions are based on the assumptions that the companies can
maximise the profits and set out the prices to sell the products. Different types of the
entry barriers are overpowered by the management, and this assists in improving the
operational works and the sales required for increasing the value for the services. In
order to sustain the market condition and the competition, the companies have to
concentrate on the cost factors and other preferences that enable the managers to
increase the price for the services. These are the important factors that assists in
improving the sales and the value for the services, rendered to the clients.
d. Monopoly – In the monopoly market structure, single company controls the work
execution, sales and the price variations for the products in the market. It wouldn’t be
wrong to say that the whole company has a stronger holding on the performances and
the price regulations of the products in the market. Such companies exercise a
stronger market control, and this helps in regulating the price and in implementing the
changes required for increasing the sales. In such a market, the companies increase
the sales by reducing the output and by increasing the price for the services. Such
market is based on the assumption that the monopolistic market has a perfect market
condition to increase the profit earnings. These companies have a positive aspect to
set out the price and to increase the sales. However, there exists a huge barrier that
restricts the entry and exit of the companies in such a market. It is because one
company has a stronger control over the market and it is equipped to deal with the
changing needs of the clients. The prices are determined based on the requirements of
the clients and the availability of the products in the market.
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9. References
Fleetwood, Steve (August 2014). "Do labour supply and demand curves exist?". Cambridge
Journal of Economics. 38 (5): 1087–113. Retrieved from
http://eprints.uwe.ac.uk/26528/2/Labor%20S%2BD.10.final.pdf
Kibbe, Matthew B. "The Minimum Wage: Washington's Perennial Myth". Cato Institute.
Reirveed from https://www.cato.org/publications/policy-analysis/minimum-wage-
washingtons-perennial-myth. Retrieved from
http://www.springer.com/in/book/9783319661032
Marwala, T, Hurwitz, E (2017). Artificial Intelligence and Economic Theory: Skynet in the
Market. Retrieved from http://www.springer.com/in/book/9783319661032
Mankiw, N.G.; Taylor, M.P. (2011). Economics (2nd ed., revised ed.). Andover: Cengage
Learning. Retrieved from https://cengage.com.au/product/title/business-
economics/isbn/9781473722446
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10. References
Fleetwood, Steve (August 2014). "Do labour supply and demand curves exist?". Cambridge
Journal of Economics. 38 (5): 1087–113. Retrieved from
http://eprints.uwe.ac.uk/26528/2/Labor%20S%2BD.10.final.pdf
Kibbe, Matthew B. "The Minimum Wage: Washington's Perennial Myth". Cato Institute.
Reirveed from https://www.cato.org/publications/policy-analysis/minimum-wage-
washingtons-perennial-myth. Retrieved from
http://www.springer.com/in/book/9783319661032
Marwala, T, Hurwitz, E (2017). Artificial Intelligence and Economic Theory: Skynet in the
Market. Retrieved from http://www.springer.com/in/book/9783319661032
Mankiw, N.G.; Taylor, M.P. (2011). Economics (2nd ed., revised ed.). Andover: Cengage
Learning. Retrieved from https://cengage.com.au/product/title/business-
economics/isbn/9781473722446
9
